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“EXCELLENCE THROUGH KNOWLEDGE” P A G E 38 others during the growth phase of the economy (e.g. leisure and hotel). The second reason appears to be psychological in nature and it reflects investors’ belief about a sector’s future performance relative to another or a momentarily fashion. Therefore at each point of the economic cycle there appears to be sectors that have more chances than others to generate extra returns (Tani and Sassetti 2003). Thus the aimof sector rotation is to switch portfolio regularly so as to earn some of the extra returns that different sectors experience relative to the rest of the market (Tani and Sassetti 2003). This study investigates the efficiency of equity allocation strategy based on changes in the U.S. prime bank rate. Based on the assessment of the literature, it is believed that there is a void regarding studies which investigate sector rotation strategies based on changes the prime bank rate. Studies done by Conover, Jensen, Johnson and Mercer (2005 & 2008) bear some resemblance to this current study, they examine sector rotation and monetary conditions with emphasis on the Federal Reserve monetary policy. Therefore, while the approach of this study will take a similar direction, this study looks at a more extended period from 1949 to 2012. Editor’s Note: This research was published in full in the International Journal of Business and Social Research (IJBSR), 4 (5): 124-130, 2014.